Tennessee Valley Authority:

Issues Surrounding Decision to Contract Out Construction Activities

RCED-92-105: Published: Jan 31, 1992. Publicly Released: Feb 13, 1992.

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Victor S. Rezendes
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Pursuant to a congressional request, GAO reviewed the Tennessee Valley Authority's (TVA) decision to contract for all construction and major modification work, focusing on the: (1) basis for its decision; (2) rationale for certain procedures TVA followed in complying with the Government in the Sunshine Act; (3) decision's effect on TVA employees; and (4) decision's effect on TVA operations.

GAO found that: (1) TVA decided to contract for facilities construction and major modifications primarily to alleviate construction and modification problems and improve productivity and efficiency levels; (2) this decision reflects its new management approach, which focuses the TVA in-house work force on operations and maintenance activities; (3) in August 1991, TVA projected that contracting would result in annual savings of about $106 million, but 75 percent of the projected savings was highly dependent on contractors' ability to increase productivity and efficiency levels; (4) in January 1992, TVA revised its previous estimate and projected that the decision would result in potential annual savings of about $191 million; (5) the events leading up to and resulting in the contracting decision raised questions regarding TVA compliance with the Government in the Sunshine Act, since TVA Directors and Executive Committee members participated in deliberations concerning the contracting decision before the Committee referred the decision to the Board of Directors for final action; (6) by March 1992, TVA expects to have eliminated nearly all of its temporary trades and labor employees, over 300 annual trades and labor positions, and about 500 permanent positions; and (7) TVA implemented an Employee Transition Program to provide terminated employees with salary continuance, training, and employment assistance.

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